There was a lot of over-optimism when the new government came to power, but that hasn’t resulted into sales growth, says Dilip G Piramal, chairman, VIP Industries.
In an interview to CNBC-TV18, Piramal says the consumer demand hasn’t been in sync with expectations and hence the company has had to downgrade FY15 sales guidance to 7.5 percent from 10-12 percent.
Also read: VIP Industries Q3 profit falls 15.3% to Rs 8.5 cr
Furthermore, Piramal adds the company is continuing to spend a lot on brand building as it has recently started promoting two new brands- Caprese and Carlton.Below is the verbatim transcript of Dilip G Piramal’s interview with Ekta Batra & Anuj Singhal on CNBC-TV18.
Anuj: You had guided for a revenue growth for 10-12 percent for full year 2015 but 9 months sales have only grown up at about 7.5 percent. Would you be revising your full year guidance now?
A: I would say it is revised because this is a general state of the Indian industry. This year particularly consumer goods, the sales growth has not been as good as what we were planning initially. We are still waiting for things to take off. In the beginning there was a little bit of over optimism with the formation of the new government and the consumer demand has not been all that breadth.
Ekta: What would you revise it to then?
A: The same what we have been doing so far it will be in that region. Because anyway 9 months are over so there is not too much time remaining. I would like to say that, generally the feeling is that things should be better next year.
Anuj: Any guidance for next year?
A: No, at this moment I will keep quite.
Ekta: What is on your wish list from the Finance Minister for the upcoming Budget for your industry?
A: The most important thing for us and for the country as far as the Budget goes is the goods and service tax (GST). The implementation of the GST because that will be a really path breaking event and that has a very strong impact on the economy. Otherwise I would say that the general economic steps that the government is doing to revive the economy particularly by improving the infrastructure is very good and those things take a little bit of time I understand that. It is not something very like tax rates and all which you can change in a minute. However, restoring all the infrastructure projects which have been stalled very badly in the last five years is the good priority and like the coal allocation has been so good and it has been so transparent. We need more than the policies it is the implementation of projects and policy in our country that has been lacked.
Anuj: Your margins have come off over time in the last quarter also any particular reason for that?
A: As it is our margins are quite low. For the last two years ever since the rupee has depreciated considerably our margins have remained quite low. In this last quarter what happened is that we had a lot of advertising. We are promoting two new brands that is Carlton and Caprese are handbag brand.
At this time the brand-building is an expensive process because the advertising is much higher than our normal advertising proportion. Advertising is nearly 30 percent of the sales. The sales are very low because these are virtually new brands. In this last quarter we advertised all our brands VIP, Skybags, Carlton and Caprese. We had an about Rs 10 crore extra expenditure and on our normal profit of Rs 15 crore in this quarter Rs 10 crore is very large. For the long run we have to make this investment.
Ekta: What is your outlook on ads spends going forward? Would you sustain them at these levels or may be increase?
A: Our percentage will remain about 5-6 percent of our sales. We would like to maintain that, it could go up little bit because of these new brands. Overall in the luggage segment our ratio is about 6 percent.
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